British Petroleum Company, Ltd.

Case BackgroundFormed in 1909, British Petroleum (“BP”) was the world’s seventh largest industrial company and the third largest oil company based on 1986 sales figures. As a part of its decentralization plan which prepares for the privatization of the nationalized industries, the British Government initiated a sale of BP’s stock in March 1987. Later on BP announced an offering of new stock in conjunction with the government sale in July 1987. Underwriting agreement was made between BP and both the domestic and international underwriters on 15 Oct 1987.

The offering date was set for 30 Oct 1987. The price for both the fixed-price offer and the international offer was set at ￡3.30 payable in three installments. While the first installment of ￡1.20 was due immediately upon sale, the second and third installment of ￡1.05 were due on 30 Aug 1988 and 27 April 1989 respectively.

Right after the underwriting agreement was made, the stock market suffered its largest decline in history. The underwriters of the BP issue faced substantial losses as a result of the drop in BP price. Refusing to rescind the deal, the British government announced on 29 Oct 1987 that the offering would proceed as planned, and the Bank of England would offer a repurchase plan for the underwriters. The bank would buy for ￡0.7 any and all partly paid BP shares that would begin trading the following day. Those who sold their shares to the bank would then be relieved of the second and third installments. The offer to repurchase shares would expire on 6 Jan 1988.

Case ObjectivesWith the drop of BP’s stock value and the Bank of England’s offer of the repurchase plan, the objectives of this case study is to 1) Evaluate from the point of view of the U.S. underwriters the value of the repurchase plan, so as to help decide if they should sell their partly paid BP stock to the Bank of England instead of holding on it to sell it to the individual investors after the offering date; 2) To compare the value for the repurchase plan with the total change in equity value of the U.S. underwriters, so as to have an extra reference on the value of the repurchase plan.

Discussion
■ The Repurchase Plan as a Put OptionAccording to the case, anyone who owned partly paid BP shares could sell them at any time to the Bank of England for £0.7 regardless of the then prevailing market price. We have concluded that this offers the equivalent of the Bank of England writing a put option with the strike price of £0.7 plus the present value of the remaining two installments of the price of the BP shares. To be more specific, since the option could be exercised anytime during the life of the offer, it should be treated as an American option.

■ Methodology - The Black-Scholes ModelAfter the identification of the repurchase plan as a put option, it comes to the vital part of the case study—valuation of the option. As stated earlier, the repurchase offer resembles an American put option which means the Binomial model would be more appropriate for the calculation of the option price. We are aware that the a major limitation with the Black-Scholes model is its incompetence in pricing an American option due to the fact that it only calculates the option price at expiration. However, the statistics given are not sufficient enough for us to precisely compute the price of an American option. Furthermore, the main objective of this report...

...Hathaway investment was worth 750 million $.
Mr. Buffett did not achieve these amazing returns for his Shareholders by using complicated investments strategies or by borrowing money to magnify investment returns. Instead, when you study his investments philosophies, some simple things began to emerge.
1. He buys companies with the intent of never selling them.
2. He only buys the stock of companies in sound financial condition that can be purchased well below his assessment of their value.
3. He only buys stock in companies he understands.
Warren Buffett was born on August 30,1930 in Omaha, Nebraska the 2nd of three children and only Son of U.S representative Howard Horman Buffett. Even as a child, Buffett displayed an interest in making and saving money. In his high school days, he went door-to-door selling chewing gum, Coca-Cola, or weekly magazines. For a while, he worked in his grandfather grocery store. Buffett's interest in the stock market and investing was also dated from his childhood only. He also used to spend his days in the costumer's lounge of a regional stock brokerage near the office of his father's own brokerage company. On a trip to New York City at the age of 10, he made a point to visit New York Stock Exchange. At the age of 11, he bought 3 shares of Cities Service Preferred for himself, and 3 for his sister. While in high school he also invested in a business owned by his...

...Contents
1.0 Introduction 2
2.0 BP the company 2
2.1 Political Factors Affecting BP Oil Production 2
2.1.1Libya 2
2.1.2 Egypt 3
3.0 Economic Factors Affecting BP Oil Production 4
3.1 UK VAT Increases 4
3.2 Increasing Oil Prices 4
3.3 Reduction in World Oil Consumption 5
3.0 Environmental Factors Affecting BP Oil Production 5
4.0 Conclusion 6
5.0 Bibliography 6
Brian Vanhinsbergh-Perez
Business andthe Environment
The External Environment
3 Most Significant PESTEL Factors Affecting BP
1.0 Introduction
This report will investigate the three most prominent external PESTEL factors which face BP (Beyond Petroleum). The report will provide a detailed look at how these factors affect the business, and explore the reasons behind them. Finally this report will make conclusions based on these findings.
2.0 BP the company
BP is one of the world's leading oil companies on the basis of market capitalisation and proven reserves. Its main businesses are Exploration and Production, Refining and Marketing, and Chemicals. Exploration and Production's activities include oil and natural gas exploration and field development and production, together with pipeline transportation, natural gas processing and gas and power marketing. The activities of Refining and Marketing include oil supply and trading as well as refining and marketing. Chemicals activities include petrochemicals manufacturing and...

...BRITISHPETROLEUM
Background
BP is a leading global energy business operating in 100 countries and serving 13 million customers every day. Its main activities are the exploration and production of crude oil and natural gas; refining, marketing, supply of hydrocarbons; and the manufacture and marketing of petrochemicals. The company also has a growing presence in the gas and power sectors and in solar power generation. BP owns popular brands such as BP, am/pm, Aral, Castrol and Arco.
BP in India
Castrol India Limited is the largest company of the BP group operating in India today. Whilst lubricants is BP’s main business activity in India, the company is also involved with solar power, chemicals and oil trading, and is in the process of developing its gas and power businesses. Castrol commenced operations in India in 1919 as a trading unit for C C Wakefield. In 1983 the company went public, with 60 per cent equity held by Indian shareholders. In 1994 Burmah Castrol increased its shareholding to 51 per cent and following the takeover of Burmah Castrol by BP in 2000, BP increased its shareholding to 71 per cent. Subsequently, on the amalgamation in May 2003 of Tata BP Lubricants India Limited with CIL, BP now holds 71.3 per cent of the paid-up capital of the company. Castrol India manufactures and markets a range of automotive and industrial lubricants. It markets its...

...increasingly complex in the face of oil embargoes and decreasing supply. This increased complexity encouraged knowledge seeking in order to improve tech processes.
A knowledge framework was built to make knowledge available whenever and wherever.
Hardly ever denied a request for a peer assist. Often the person giving the peer assist gained “moral high ground” and the receiver had to take on board the recommendations for consideration. It also allowed people to do new things.
3. How would you move BPX’s learning capabilities to other parts of BP, or to other companies?
BP Chemicals not good at learning sharing, BPX – British Petroleum’s E&amp;P division was.
Personnel transfer – engineers on rotation….
Preventing “group think” or like minded people from clustering together at senior levels, where much of the info dissemination occurs.
Learning from alliances and JV’s.
IT infrastructure
Inter company IT infrastructure standards that allowed sharing of non strategic info across industries….
IT group was turned into a team of brokers, rather than a traditional inward focused IT team.
VT allowed them to build higher levels of trust between international teams – this in turn propagated further info transfers….
BP oil = command and control. I would fire those that don’t comply....

...The paper tries to evaluate BP's corporate governance framework. It tries to identify what responsibilities the Board of Directors and Senior Leadership should undertake before and during crisis management situations.
Before the spill
BritishPetroleum is an industry where accidents occur and given the complexities of such an industry, it is critical that the Board remain vigilant about company affairs and that it learns from its previous mistakes. This note tries to evaluate actions that a Board should have taken after the resignation of Lord Browne through the current crisis in the Gulf of Mexico.
The makeup of the BP board in 2007 showed a good mix of expertise and impressive credentials but was it really a glory board or did people on this board actually spend time governing BP? One important step as the chair of the Board is to reassess the Board composition to see if the existing board has the right skills, is right mix and is able to devote time to the company.
Appointing the right CEO is an important board responsibility. The actions of both the current CEO Tony Hayward and the previous CEO Lord Browne have not been consistent with the vision and priorities of the company. “Beyond petroleum” which talks about being innovative and environmentally friendly has become more of a marketing tagline rather than a way of life at BP. Lord Browne has been an aggressive risk taker and...

...From: Investment analysis team
To: Potential Investor
Subject: Investment Analysis of Stock Offerings of BritishPetroleum
BP’s stock offering, which is part of the government’s decentralization plan, has come at a time when markets are still feeling the aftermath of what has been the biggest one day drop in history. This has caused detrimental effects on the market which is felt by most, if not all companies. What could have been an attractive offer has turned sour as BP’s stock price dipped dramatically.
Upon analysing this fund-raising issuance along with the current market environment, we have concluded that this offering is not as valuable despite the addition of the repurchase plan (put option) after the first payment. We will be discussing our methodology on how we came up with our conclusion and we will also give several recommendations when this issuance will be worth investing in.
Methodology
The team decided to value the stock offering through the Binomial tree method in light of its instalment payment scheme feature, instead of using the traditional discounted cash flow methods because the former method is deemed more appropriate since it considers the uncertainty of the stock price and its potential effects.
Vital to the valuation of the offer is the computation of the volatility of BP’s stock price. To get this, we computed for the volatility of the stock price of BP for the last month (October...

...2. Introduction
BP is one of the largest multinational corporations in the world. According to CNN (2011), BP is the fourth largest multinational corporation in the world and employs over 80,000 people and making annual revenue of $392 Billion. BP has massive influence on the global economic climate and has the operation capacity to affect stakeholders. This essay will analyse BP’S current stance using Porters five forces. It will also establish who are the most important stakeholders and suggest strategies that can be used in future.
3. Porters Five Forces
This looks at he external factors that can affect which include new entrants, buyers, suppliers, substitutes and competition and can affect productivity of a business as seen in appendix A.
3.1 Threat of New Entrants
The threat of new entrants into the oil and gas industry is relatively low. This is a result of the high capital costs and technology, distribution channels, economies of scale, regulations and geopolitical barriers and the high levels of expertise required for exploration and extraction. (Mascarenhas, 1997) This makes it relatively easy for the oil and gas industry to fend of potential entrants; however the investment in relation to profit returns with suitable environmental and technical environment is relatively high.
3.2 Rivalry
Rivalry in the oil and gas industry is relatively high because of the resource based nature of the business. There is severe competition to locate and...